Opinion
Index No. 653795/2022
08-30-2023
Illinois Land Investors III LLC, Plaintiff, v. Chicago WB Investors, LLC, Defendant.
The Rothman Law Firm LLC, New York, NY (Jordan I. Rothman of counsel), for plaintiff. Leopold Law, LLC, New York, NY (Howard B. Leopold of counsel), for defendant.
Unpublished Opinion
The Rothman Law Firm LLC, New York, NY (Jordan I. Rothman of counsel), for plaintiff.
Leopold Law, LLC, New York, NY (Howard B. Leopold of counsel), for defendant.
Gerald Lebovits, J.
This action arises out of a 2018 agreement under which plaintiff, Illinois Land Investors III LLC, would develop into residential subdivisions land in Kendall County, Illinois, that is owned by defendant, Chicago WB Investors, LLC.
The agreement contains a choice-of-law clause providing that it shall be "governed by, construed under and interpreted and enforced in accordance with the laws of the State of New York." (NYSCEF No. 3 at § 13.10.) And it contains a forum-selection clause, under which the parties "irrevocably agree[] that all actions or proceedings relating to this Agreement shall be litigated" in "any state or federal court located within the County of New York, State of New York." (Id. at § 13.19.)
In 2022, plaintiff brought this action, alleging that defendant is failing to ensure that plaintiff receives development-related proceeds to which plaintiff is assertedly entitled under the parties' agreement. Plaintiff is seeking damages sounding in breach of contract and breach of the implied covenant of good faith and fair dealing, and injunctive relief that would prevent defendant from continuing to engage in the alleged breaches, going forward. (See NYSCEF No. 1 at 6-9.) Additionally, in connection with the current action, plaintiff recorded a notice of pendency on the Illinois property being developed with the county recorder for Kendall County. (See NYSCEF No. 10.)
Defendant now moves, apparently under CPLR 3211, to dismiss plaintiff's third cause of action; and moves under CPLR 6514 to cancel the Kendall County notice of pendency. The request to dismiss the third cause of action is denied without prejudice; the request to cancel the notice of pendency is denied.
DISCUSSION
I. Defendant's Request to Cancel the Notice of Pendency
CPLR 6501 provides (with limited exceptions not relevant here) that a "notice of pendency may be filed in any action in a court of the state or of the United States in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property."
A party that owns property subject to a notice of pendency may obtain cancellation of the notice under the procedures set out in CPLR 6514. A court must, on motion," direct any county clerk to cancel a notice of pendency" in several specified circumstances. (CPLR 6514 [a] [emphasis added].) A court may, on motion," direct any county clerk to cancel a notice of pendency[] if the plaintiff has not commenced or prosecuted the action in good faith." (CPLR 6514 [b] [emphasis added].) If the underlying action does not qualify as one in which the judgment would affect title, possession, or use and enjoyment of real property, cancellation on motion of a notice of pendency is mandatory, rather than discretionary, under 5303 Realty Corp. v O & Y Equity Corp. (64 N.Y.2d 313, 323 [1984]).
On this motion, defendant contends that this action does not qualify as affecting title, possession, or use and enjoyment of property within the meaning of CPLR 6501-and therefore that the Kendall County notice of pendency must be canceled as invalid. (NYSCEF No. 11 at 4-6.) Although defendant does not expressly identify the authority permitting (and requiring) the court to cancel the notice, that authority would appear to derive from CPLR 6514 and precedent, such as 5303 Realty Corp., interpreting that provision. This inference is bolstered by defendant's request for costs under CPLR 6514 (c) in connection with canceling the notice. (NYSCEF No. 11 at 7.)
Plaintiff's opposition papers, and defendant's reply papers, spend considerable energy disputing (i) whether Illinois or New York law governs the analysis of the validity of the notice of pendency (see NYSCEF No. 19 at 2-3 [opposition]; NYSCEF No. 24 at 2-3, 8-9 [reply]); (ii) whether the notice of pendency is valid under Illinois law and under New York law (see NYSCEF No. 19 at 3-7; NYSCEF No. 24 at 4-7); and (iii) whether defendant can obtain costs if the notice is cancelled (see NYSCEF No. 19 at 7-8; NYSCEF No. 24 at 7).
As signed by this court, the order to show cause bringing on the current motion provided that no reply would be permitted. (See NYSCEF No. 17 at 2.) This court later granted on consent defendant's request for leave to submit reply papers.
These arguments, however, skip over a simpler and more fundamental issue that controls this court's disposition of defendant's request to cancel the notice: Whether this court even has the power to cancel the Kendall County notice of pendency in the first place. This court lacks that power.
Notices of pendency do not exist "in the air, so to speak." (Palsgraf v Long Is. R.R. Co., 248 NY 339, 341 [1928] [internal quotation marks omitted].) They are documents entered by local-government officials in local-government property records. As reflected in the language of CPLR 6514 quoted above, canceling an extant notice of pendency requires action by those same officials to alter the relevant property records.
In this case, although the basis for the notice of pendency at issue is the action before this court, the notice pertains to property in Kendall County, Illinois, and was recorded in the Kendall County property records by that county's recorder. Thus, canceling the notice would require this court to direct a county official in another state to perform an act. But this court has no personal jurisdiction over that official. The Kendall County recorder has not been served with process. Even if the recorder had been properly served, this court sees no basis in CPLR 301 or CPLR 302 for exercising power over a public official of another state, "so as to enforce judicial decrees" entered in this case. (Cf. Keane v Kamin, 94 N.Y.2d 263, 266 [1999] ["Service of process cannot itself vest a court with jurisdiction over a non-domiciliary served outside New York State, however flawless that service may be."].) This court declines to issue an order that would lack binding effect due to the absence of personal jurisdiction over the subject of the order. (See Matter of Arnold v Department of Health of City of NY, 174 A.D.2d 409, 409-410 [1st Dept 1991 [declining to afford full faith and credit to an order entered by a Maryland court "to the extent it requires respondent to issue new birth certificates since the Maryland court lacked jurisdiction over respondent, and is therefore without power to direct respondent to perform an act"].)
The current motion presents the converse scenario from the decision in New Planet Energy Development, LLC v MBC Contractors, Inc., which addressed requests to cancel notices of pendency filed in Rockland County with respect to property in Illinois, based on an action brought in Illinois state court. (See 61 Misc.3d 635, 636, 638-641 [Sup Ct, Rockland County 2018].)
This case thus differs from one in which a court orders a defendant over whom it has personal jurisdiction to take action with respect to out-of-state property. (See Starbare II Partners, L.P. v Sloan, 216 A.D.2d 238, 239 [1st Dept 1995].)
This court denies defendant's request to dismiss the Kendall County notice of pendency, and the corollary request for costs under CPLR 6514 (c).
This court recognizes the possibility that should defendant bring a proceeding in Illinois to cancel the notice of pendency, plaintiff might raise the forum-selection clause of the parties' contract as a ground to dismiss that Illinois proceeding. That argument, if accepted, would effectively deny defendant a meaningful forum for challenging the notice's validity. As a result, this court struggles to see how the forum-selection clause, applied in that manner, could be consistent with the public policy of either New York or of Illinois.
II. Defendant's Request for Dismissal of Plaintiff's Third Cause of Action
In addition to seeking cancelation of the notice of pendency, defendant also asks the court to dismiss plaintiff's third cause of action. (See NYSCEF No. 11 at 9-10.) This request is denied without prejudice. Defendant has not, on the current record, shown that the third cause of action is subject to dismissal.
Defendant's motion papers treat the third cause of action as coextensive with plaintiff's filing of the notice of pendency. Defendant argues that the notice is invalid and that, "[a]s such, the Third Cause of Action must be dismissed." (NYSCEF No. 11 at 10 [emphasis omitted].) And defendant suggests that plaintiff filed the notice "[r]ather than formally file an application for injunctive relief." (NYSCEF No. 24 at 2.) Defendant misreads plaintiff's complaint.
Plaintiff styles its third cause of action as one for "Declaratory Judgment/Injunctive Relief." (NYSCEF No. 1 at 8.) The allegations supporting that claim state that "Defendant's conduct is violating Plaintiff's rights," that this conduct "is causing Plaintiff irreparable harm," that "the balance of the equities favor[s] Plaintiff," and that "Plaintiff has no full and adequate remedy at law." (Id. at 8-9 ¶¶ 30-33.) These allegations correspond to the elements of a permanent injunction-not a notice of pendency. And although the wherefore clause of the third cause of action does seek a declaration "confirming that Plaintiff is entitled to place a lis pendens on the Development" (Id. at 9), that clause also seeks relief "enjoining Defendant from selling lots in the Development" in a manner that, according to plaintiff, breaches the parties' agreement (id.).
Defendant's motion to dismiss the third cause of action must be denied because it does not address the injunction-related allegations, or request for relief, related to that claim. This is not to say that the request for injunctive relief would necessarily survive a motion to dismiss. Plaintiff's complaint appears to be somewhat vague and unclear, for example, about the nature of the alleged irreparable injury plaintiff is suffering that cannot be redressed with money damages. But the court need not definitively resolve that question here, because defendant has not challenged the sufficiency of plaintiff's claim for injunctive relief.
Accordingly, it is
ORDERED that the branch of defendant's motion seeking cancellation of the Kendall County, Illinois, notice of pendency is denied; and it is further
ORDERED that the branch of defendant's motion seeking dismissal of plaintiff's third cause of action is denied without prejudice; and it is further
ORDERED that the parties appear before this court for a preliminary conference on September 22, 2023.